A coalition of broadcasters is seeking not only to refuse to sell unused spectrum in a potential FCC voluntary auction, but to kill the auction altogether in a bid to disallow their peers to sell their spectrum. (Source: Corbis)

U.S. FCC pleads Congress to overrule select objections and authorize a voluntary auction

On the one side you have the U.S. FCC led by Obama administration appointee,
Chairman Julius Genachowski [profile], and on the other you have a coalition
of powerful TV broadcasters. Neither party sees eye to eye on
"incentive auctions", though a handful of broadcaster support the
auctions, with certain stipulations.

I. Should Broadcasters Get to Veto Their Peers' Right to Freely Sell
Spectrum?

The majority of FCC commissioners complain that TV broadcasters are squatting
on large tracts of spectrum that could be used for other applications -- like
voice and data traffic on mobile devices.

The broadcasters were given much of that spectrum at a time when spectrum was not
formally auctioned. Some of the spectrum was also sold to them at rates
well below today's prices.

But as the spectrum has become more valuable, the broadcasters have looked to
hold it more tightly. In theory this spectrum could be used for future development,
but realistically, it's unlike that these broadcaster will significantly
increase their usage.

So why are they holding on to it, then? Part of the reasoning is likely due to
the appreciation factor. But broadcasters also argue that their spectrum
position is partly out of technical issues.

Alan Frank, chief executive of Post-Newsweek Stations Inc., a division of the
Washington Post Comp. (WPO),
complains that even though the spectrum is "voluntary" it creates a
situation of compulsory shifting of spectrum.

He says that some stations may cooperate with the FCC, selling spectrum and
shifting their remaining holdings to consolidated "TV" blocks.
As a result, the existing range of spectrum occupied by TV broadcasters
would become interspersed with blocks of mobile usage. Mr. Frank argues
these blocks would increase interference on and degrade the strength of TV
signals of those who stayed behind. Thus he argues the proposal is in
effect a mandate, not voluntary, due to technical issues.

He states in an interview with Reuters,
"We're talking about putting the whole system at risk. We need to start
defining not how the auction works, but what this is going to mean for the
broadcasters who don't participate in the auction."

That's one perspective. Chairman Genachowski argues that the technical
concerns aren't as severe as some TV providers make them out to be. Under
his leadership, the FCC wants to implement a major spectrum auction that is
ostensibly voluntary on the part of television broadcasters.

And he says that giving certain objecting TV broadcasters the ability to veto
other broadcasters' rights to sell spectrum they own would run contrary to the
principles of capitalism.

He comments, "I believe the single most important step that will drive our
mobile economy and address consumer frustration is authorizing voluntary
incentive auctions. However, voluntary can't mean undermining the potential
effectiveness of an auction by giving every broadcaster a new and unprecedented
right to keep their exact channel location."

II. You Can Not Change the Laws of Physics...

Modern mobile devices use over 100 times more data than older models. As
Scotty used to say on Star Trek, "You can not change the laws
of physics!"

The problem is that wireless device makers are using up almost all the available spectrum that
is capable of being used by lower power devices. Given fundamental
limitations of physics, the wireless device makers now can only turn to try to
buy existing allocations.

The FCC wants to patch together 500 megahertz of spectrum to sell. Much
of that has been cobbled together already through repurposing of government
holdings. But the FCC needs 120 more megahertz to meet its objective.

States Chairman Genachowski, "This growing demand is not going away. The
result is a spectrum crunch. The only thing that can address the growing
overall demand for mobile is increasing the overall supply of spectrum and the
efficiency of its use."

He made these remarks before representatives for broadcasting companies at an
annual convention in Las Vegas. His comments were met with mixed
reactions. To be clear some companies, particularly those who are
strapped for cash, are thrilled with the idea as the government is doing all
the hard work of lining up potential buyers and advertising the available
spectrum. But other broadcasters, in a more comfortable position, are
quite upset about the idea.

Ultimately the issue will likely have to be resolved by Congress. A
voluntary auction is a major undertaking, and even were it not for the
controversy, the FCC likely lacks the authority to execute such a plan.
Congress, however, could give that authority.

The question now becomes whether Congress will decide to support an auction,
allowing interested broadcasters to sell their spectrum. Alternatively,
they could reject the proposal, safeguarding the holdouts from possible
interference, allowing the value of their holdings to further increase as
available spectrum gets scarcer and scarcer.

Note:
People often complain that parties like Verizon Communications Inc. (VZ) have
failed to use all the spectrum they've been allocated thus far. While
this is valid, it's widely acknowledged that these chunks will soon be put to
use. Building cell phone infrastructure (towers, backlinks) is an
expensive business that costs billions a year in the U.S. alone.
Thus the spectrum will certainly be put to use by wireless carriers, it
might just take a little while.

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It's company A's right to sell their property at whatever price and at whatever time they choose. The analogy is there are wheat farmers A and C. The current price of wheat is low. Farmer C wants everyone to wait so that the price rises before selling. Farmer A needs the cash so decides to sell now. There is no "right" for farmer C to sell at their desired price, only what the market will bear. Farmer C has no right to tell farmer A that they can't sell their wheat. The government role in this case is analogous to say, "hey farmer A, I see you want to sell your wheat to village B in the town over, but you don't have a large enough cart....I'll send one over, because I know the people in village B really need the food.".

If farmer C wants to pay farmer A not to sell, that's their business. Of course, then you probably have a cartel ala OPEC.

Better yet, auction off leases instead of ownership. If they want to keep it, they have first crack via renewal. If not, back on the block it goes.

This would serve as both a direct revenue stream towards FCC administration of the spectrum, etc, but also a disincentive that prevents corporations from holding on to blocks purely for their future worth.

MOST of the spectrum squatters received their current apportionment of the spectrum for free, or through cut-rate acquisition of others who had received their spectrum via assignment.

Of course, then, do you confer enforcement powers upon the FCC? or do you hand over lease administration to Dept. of Interior? do you ultimately run into the political nightmare analogous to not being to drill WHILE gas going to $4 + per gal.? etc.

Yup, that's the problem and solution right there in a nutshell. Those frequencies should never have been auctioned off for a one-time fee. They should've been leased for an annual fee, subject to renewals and increases reflecting inflation and the value of the spectrum.

A roundabout way to do it would be to start charging "property tax" on the spectrum. That's what keeps down land squatters. If you own a chunk of real estate in the middle of the city, the property taxes are going to be high enough you'll either start doing something with it to help pay for the taxes, or sell it.

quote: He says that some stations may cooperate with the FCC, selling spectrum and shifting their remaining holdings to consolidated "TV" blocks. As a result, the existing range of spectrum occupied by TV broadcasters would become interspersed with blocks of mobile usage. Mr. Frank argues these blocks would increase interference on and degrade the strength of TV signals of those who stayed behind. Thus he argues the proposal is in effect a mandate, not voluntary, due to technical issues.

This too is a screwup in implementation. With the advent of HDTVs, we shouldn't have to be dealing with people tuning in to channel 7-1. HDTVs are by definition digital. They should be grabbing each station's callsign and displaying those instead of channels. So if you want to watch KABC, you change the channel to KABC, not 7-1. That way, if KABC ends up having their frequency reassigned from 7-1 to 3-1, nothing changes for the TV viewer. Their TV automatically detects the callsign change, and remaps KABC from 7-1 to 3-1. Tuning to a specific frequency should still be possible deep in the TV's menu, but the default interface presented to the typical viewer should be frequency-agnostic.